Why the diversion from a well-established hospitality business to food and beverage?
We have a lot of food and beverage options at our hotels which have become very popular with the guests. Having developed four hotels, we operate 15 F&B hotel outlets. Also, the F&B market is growing at a rapid pace in the country. We wanted to address this market on a broader level. Although we have our existing hotels across the country for geographical expansion, we did not have a presence in the QSR space, which is a must considering that it is what drives growth. You can’t expect Fine Dining or hotel restaurants to help you reach the larger population, so we forayed into the QSR market with three famous American brands.
The organised share of the QSR market is really growing rapidly and within this share, international brands have been able to have a larger footprint in India. So, instead of building our own QSR brand we thought of partnering with people who have made it big.
What did your research in the Indian market throw up?
We assessed the current players and the QSR gaps in India and identified three gaps, which we followed up by launching three brands to plug the gaps. The first gap was at the confectionery level. India doesn’t have a pan India confectionery player who gives great tasting cookies, brownies, etc, so we got Great American Cookies offering 16 standard flavours. It offers 6 different types of brownies, Double Doozie cookies (cookies filled with cream), and cookie cakes. Specific variants for different occasions will also be available. The cookies will be priced roughly at Rs 60 to Rs 100 per piece targeting the mid market segment. Great American Cookies is the number one retail-based American cookie chain present in over 300 locations. Internationally, it is also available in Guam, Bahrain, Mexico, Saudi Arabia, Chile, and UAE.
Secondly, we noticed a gap in the frozen yogurt market in India. The country already has cultural affinities towards yogurt, but when you look at refreshing cold desserts in India, you are compelled to consume high calorie sugar and fat items with limited healthier alternatives. Forever Yogurt has 60 flavours and 60 different toppings. At any given time there will be about18 flavours available. Most of the frozen yogurt outlets in India are not self-serve, but we believe that self serve is the only way to go ahead in frozen yogurt. It is all about customisation to the level you want, and with India being a very customisation centric market, the brand is all the more relevant.
Even in the U.S. if you see how the frozen yogurt market has evolved, the self serve guys have expanded, whereas the pre-serve guys contracted during the consolidation. And that is how I see it happening in India also. Forever Yogurt is one of the leading self-serve frozen yogurt brand in the U.S. The pay-by-weight facility allows consumers to relish the desired quantity. Per serving of Forever Yogurt will cost Rs 30 to Rs 50 onwards. For Forever Yogurt, we have the rights for India, Bangladesh, Nepal, Sri Lanka, Bhutan, and Myanmar.
On the sandwiches side, India likes hot sandwiches and Quiznos is a pioneer of the chef inspired toasted subs, which means you don’t make your sandwich with a pepper bar; you can vary the amount of spices and customise as per your taste. We think Quiznos is a great fit for east India and Bhutan. These brands also give us the opportunity to take a look at the international markets, for instance, for For Forver Yogurt, Myanmar is a really large market, while in Sri Lanka it is growing rapidly.
When will the first store open and where? What will be the store format?
Our first stores will open in Kolkata in the next 3-6 months. We have also received a lot of franchise interest so we plan to open both company-owned and franchisee stores. The only way to have a serious impact in the F&B space in India is to have franchisees. We have already received a franchise query from Bilaspur. Having only company-owned stores forces a brand to grow in a linear fashion and not exponentially, but with our model we can keep the consistency and grow exponentially.
We will open in Kolkata for the simple reason that our company is headquartered there. Also, the city is not known to have the first stores of international brands in the country, so this is also our way of giving back to our city. On the retail side, the food service market in Kolkata is very resilient. Some of the most well performing stores of many QSR brands are in Kolkata. Going forward, we think NCR will be the largest market for us for all our brands except Quiznos, for which we have the rights only for east India.
What are the prerequisites for a Forever Yogurt and Great American Cookies franchisee?
We are looking for strong franchise partners as this is not a quick return kind of business but one has to be consistent with quality. The area required would vary between 700-1,000 sqft per store. For Great American Cookies, it could be as small as 300 sqft. The franchise investment would range between Rs 25 lakh and Rs 40 lakh depending on the location in a mall, food court, etc. Two of the biggest challenges in F&B space are rentals and staffing cost; this is where we can make our model more profitable by allowing a franchisee or our company-owned stores to stock multiple brands in the same location by having a co-branded outlet. We will have standalone stores plus co-branded stores.
The format for both the company owned and franchised stores will be the same. However, it will vary for Forever Yogurt full store and Forever Express. The latter has less variants and can be opened in as small as 150 sqft space, thus giving a great ROI in terms of the rentals being paid.
Will you set up a manufacturing facility in India for these brands?
In terms of manufacturing, we are importing the dough from the batter facility in Atlanta, Georgia (USA) for Great American Cookies and the cookies will be baked in the store here. We will build a supply chain in India for Quiznos and Forever Yogurt. The background work for the supply chain has already begun. We are also setting up a large training centre for all our franchisees and employees.
We would import whatever machinery is not available in India, but wherever we can, we will work with vendors to get machines of international standards in India. Going forward, we will localise what we can.
In our ‘Train the Trainer’ programmes, the in-house trainers get trained by our parent brands, that is, the American companies. They have already made substantial number of market visits and will keep coming to India to train our team and our franchisees. For instance, Quiznos has a Quiznos University, so our trainers will be going back to QuiznosU on a regular basis to learn new techniques, products, ideas, marketing skills, etc. After coming back, then will conduct training camps for our team and franchisees. Generally, training of a team member or a store opening training would take three to four weeks. We also have an e-learning portal.
Tell us about your marketing strategy.
We are looking at mostly in-store, word of mouth, malls, and social media marketing. Forever Yogurt is very social media-centric. For this brand, we have customisation to the level that every city will have its own logo because food is personal and community driven. For example, the Kolkata store has Howrah Bridge as the logo. India being a combination of multiple countries in terms of consumer behaviour, Frozen Yogurt flavours will be tweaked from city to city as per the region’s preferences.
For cookies we will have an online sales channel as well. Our own mobile app for Quiznos will allow users to place orders for home delivery or pick-up. Forever Yogurt will not have delivery option because it is a perishable product, but we will tweet flavours, updates, what’s available, special offerings, etc. In general, industry spend on social media marketing is 5 to 7 percent of revenue as a whole. For us, social media is going to take up a larger chunk than other brands.
Please share your future plans.
We plan to have 100 stores across the three brands by 2016 with a mix of company owned and franchise outlets as the hybrid model is the best suited business model for India. In Kolkata alone, we will open three stores (each) for Great American Cookies, Forever Yogurt, and Quiznos in the current fiscal. Gradually, we will look at tier 2 and 3 cities also. Going forward, we plan to bring more international brands to India. Given the possibility, we don’t mind helping convert the local icecream shops into frozen yogurt stores if they are well located and franchisee operated.
Because of our presence in the logistics segment, we will build a supply chain and front-end for the brands. For outlets falling in the north-east, our logistics company will help the brands build a supply chain. We are also coming up with a manufacturing facility for ready-to eat foods under the Zip Zap brand in Meghalaya. The products will be sold through points of distributions.
For Quiznos, Polo Foods plans to open stores across Eastern India in West Bengal, Bihar, Orissa, Jharkhand, Assam, Arunachal Pradesh, Manipur, Nagaland, Meghalaya, Tripura, Sikkim, Mizoram, and Union Territories of Andaman and Nicobar Islands. Since it is a lunchtime product, we are also tying up with companies for captive outlets, that is, if there is a large office block owned by a company then we can offer special pricing for the employees.